Today (March 2), SoundCloud is shaking up the music stream service wars with a new royalty-splitting system that aims to favor all artists with equal payment opportunities, no matter if they’re big or small. Their concept is simple, but it’s a potential game changer: with SoundCloud’s new fan-powered royalties, the money from a subscriber’s subscription fee and ad revenue is split between the artists they listen to.
This model is a direct response to the “pro-rata” payout system that platforms like Spotify implement, where all the money generated from subscriptions and advertisement go to a big pool and is then divvied up by the share of streams generated by big artists. This allows big stars to rake in large amounts of money from streams, leaving smaller artists behind.
In an example on SoundCloud’s website, an artist with 124,000 followers would make $120 under the traditional “pro rata” model, but with the platform’s new user-centric model, they would make $600 in the same period. This is great news for smaller independent artists, as each of their fans’ streams translate into money in their pocket, also opening a door for engagement opportunities.
The COVID-19 pandemic has generated important conversations about how artists are currently compensated in streaming services, and they have led to solutions like Spotify’s questionable “tip jar” and the popular Bandcamp Fridays. Now, SoundCloud is stepping up to bring transparency and equity in how artists are getting paid.
The fan-powered royalties are rolling out on April 1, and SoundCloud Premier, Repost by SoundCloud, and Repost Select artists are able to participate. Click here to learn more about the eligibility requirements.